Monday Ticker.

Main event: The American consumer has begun to resemble a...

March 28, 1994|By William Sluis.

Main event: The American consumer has begun to resemble a swimmer trying to manage a smile even though a snapping turtle is clamped onto his big toe. It's a tepid grin, at best. Consumers are displaying a bit more confidence, even though they feel squeezed by an economy stressing downsizing and lower-paying jobs. Yet despite the increased confidence, some economists are fretting. They worry that inflation could heat up if Americans continue to roll up debt to acquire new cars, pickups and mini-vans, not to mention washers, dryers and dishwashers, amid strong sales of new homes. The buying boomlet already has helped stir higher interest rates. A fresh reading on consumer confidence comes Tuesday from the Conference Board.

Watch for: A slight move up or down, but nothing to write home about. That's the prediction of Gary Shilling, an economist in Springfield, N.J., who believes that consumer confidence surveys no longer reveal much about what Americans will do. "People can feel lousy and still rush out to buy a house, because they see this as a last chance to beat higher interest rates," says Shilling. While he sees a modest spending spree under way, Shilling expects it to last only until autumn. After that, he expects a spending slowdown and another recession.

Afterthought: If the economy slides into reverse, it would bring to a screeching halt the recent increase in interest rates. But at least one economist does not expect that scenario to occur. "The rapid rise in spending over the last six months has raised the whole structure of interest rates," says Chicago economist Robert Genetski. He argues that the Fed, instead of acting too early to boost short-term rates, moved too late to head off inflation.

Next up: The Commerce Department Tuesday reports on new-home sales for February. On Wednesday the department reports on February factory orders. Thursday it provides final revisions of figures on fourth-quarter gross domestic product.

More events: The end of the workweek will see an unusual phenomenon: Trading will occur at the Chicago Board of Trade and the Chicago Mercantile Exchange, even though the New York Stock Exchange and other exchanges will be shut for Good Friday. Chicago futures markets leaders insisted on running an abbreviated session to enable investors to trade in response to the Labor Department's report on March unemployment and the National Association of Purchasing Management's monthly survey on the manufacturing sector.

Markets: The Dow Jones industrial average lost 120.92 points last week, closing at 3774.73. It was the biggest one-week setback for the average since the so-called mini-crash of Oct. 13, 1989, a week that saw a plunge of 216.26. Last week's sell-off pulled the Dow back to its lowest closing level since Jan. 3, when it finished at 3756.60.

Outlook: The Standard & Poor's 500-stock index is off 5.87 points, or less than 2 percent, for this year, ending Friday at 460.58. Far more severe losses have been suffered by investors who sent money overseas. For neophytes to global investing, told only months ago that sending their savings to other continents was the easy way to balance a portfolio, the lessons since Jan. 1 have been cruel. The biggest crunch has come in Asia, notably in Hong Kong, where prices are off more than 20 percent. Whether Wall Street can fend off a global downdraft remains to be seen.